Table of Contents


Laliberté v. Canada, 2020 FCA 97

Tax Court could determine a taxable benefit percentage (different from that assumed by the Minister) based on all the evidence

The founder and controlling shareholder of Cirque du Soleil, had been found by the Tax Court to have received a taxable benefit under s. 15(1) (or alternatively, under s. 246(1)) equalling approximately 90% of the $41.8 million cost of sending him on a trip to the international space station (ISS) in September and October 2009, given that the cost was borne by his family holding company and then largely passed through to the top operating company (“Créations Méandres “) in the Cirque du Soleil group, but with there being a matching contribution of capital by the holding company to Créations Méandres so that independent shareholders would not bear any of the cost of the trip. CRA had assessed on the basis that the full cost of the trip was a taxable benefit.

After rejecting (at para. 54) the taxpayer’s submission that the Tax Court had erred in not recognizing that the taxpayer had “demolished” the Minister’s assessing assumptions, Geason JA went on to state (at para. 56):

[I]t was open to the Tax Court to determine the value of the shareholder benefit received by the appellant based on all the evidence tendered, including the Crown’s cross-examination of the appellant’s witnesses. On this point, this case is somewhat similar to Youngman. There, the appellant argued that he had succeeded in demolishing the assumptions of fact contained in the Minister’s Reply and asserted that his appeal therefore had to be allowed. … [T]his Court [instead] adopted the same approach to valuation taken by the Tax Court in the instant case and calculated the value of the shareholder benefit at the end of the case based upon all the evidence tendered.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) any subjective intention of the controlling shareholder not to be enriched did not establish that no taxable benefit 427
Tax Topics - Income Tax Act - Section 246 - Subsection 246(1) the Cirque du Soleil’s bearing most of the $41.8M cost of a space trip for its controlling shareholder gave rise to a shareholder benefit 267

Morrison v. Canada, 2020 FCA 93

onus of proof rested at all times with the taxpayer

The taxpayers (Eisbrenner and Morrison) participated in a charitable gift program (the "CHT Program”) which entailed them donating to a registered charitable foundation certificates which allegedly represented entitlements to pharmaceuticals. The Tax Court had found that these certificates were “worthless pieces of paper” and that (contrary to the taxpayers’ pleadings) they had never acquired ownership of the pharmaceuticals and, therefore, could not be considered to have donated them.

After having noted (at para. 24) that in Sarmadi, he had concluded that “[i]f the taxpayer has, on the balance of probabilities, disproven the particular facts assumed by the Minister, …there is no burden to shift to the Minister to disprove what the Tax Court judge has determined that the taxpayer has proven,” and that here “none of the witnesses at the Tax Court hearing could explain exactly how the CHT Program worked” (para. 30), Webb JA stated:

…[I]n Mr. Eisbrenner’s submission, … he only had to raise a prima facie case, which he submitted was a lower standard than the balance of probabilities. Therefore, … even though Mr. Eisbrenner had pled the fact that he owned the pharmaceuticals, he was not required to prove this fact on a balance of probabilities.

In rejecting this submission, Webb JA stated (at para. 52):

In my view, because Mr. Eisbrenner pled that he had acquired ownership of certain pharmaceuticals and transferred these pharmaceuticals to the in-kind charity, he had the onus of proving that he owned these particular pharmaceuticals on a balance of probabilities. Likewise, … Mr. Morrison… .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts taxpayers failed to demonstrate on balance that they had acquired the donated property 212

Glatt v. Canada (National Revenue), 2019 FC 738

onus on Minister to establish that her refund of a s. 163.2 penalty did not relate to any particular taxation year]

Following his assessment for a s. 163.2 penalty, the taxpayer paid $1M to CRA so as to offset interest which would be borne by him if the assessment were upheld. After the assessment was vacated pursuant to a consent judgment, CRA issued a Notice of Reassessment showing the cancellation of the penalty and a refund of the $1M but denying any refund interest on the basis that s. 164(3) requires a taxation year to be specified in order for interest to be paid – and a s. 163.2 penalty is not calculated by reference to any particular taxation years.

A significant difficulty with this CRA position was that the Notice of Reassessment in fact, in its upper right-hand corner, stated “Tax year 2012.” Diner J found that this was not an administrative error that was corrected by s. 152(8).

Before so finding, he stated (at paras. 80-81):

The Reassessment resulting from that the Tax Court Judgment cancelled his $2.8M penalty, and refunded Mr. Glatt’s Principal Amount of $1M. In the absence of other evidence, the Minister failed to meet her subsection 163(3) burden of justifying the penalty against Mr. Glatt.

The Minister appears to reverse the onus when asserting that Mr. Glatt has failed to identify which taxation year his planner penalty assessment relates to, which the Minister asserts is consistent with the fact that section 163.2 assessments are not issued with respect to a taxation year. The onus, however, cannot be on the taxpayer to identify which taxation year(s) ‑ whether any, some or none ‑ apply to the Minister’s penalty assessment, particularly when, as here, the Reassessment itself indicates a taxation year on its face.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 164 - Subsection 164(3) naming of a taxation year respecting a reassessment cancelling a s. 163.2 penalty was not an “error” that precluded the payment of refund interest 537
Tax Topics - Income Tax Act - Section 152 - Subsection 152(8) CRA could not treat its statement of a taxation year in its Notice of Reassessment as an error 367
Tax Topics - Other Legislation/Constitution - Federal - Federal Courts Act - Section 18.1 - Subsection 18.1(2) extension granted where the taxpayer had continually pursued relief 387

Sarmadi v. Canada, 2017 FCA 131

required to prove on balance that relevant facts assumed by CRA (where not peculiarly in its knowledge) were incorrect

The only issue before the Court was whether the Tax Court had erred, in connection with the taxpayer’s appeal of a net worth assessment, in finding that the taxpayer’s father had not lent him a total of $90,000 during the relevant period.

Webb JA stated (at paras. 18, 61-63):

[18] …[S]ince Mr. Sarmadi has raised the issue of whether he only had to raise a prima facie case in his appeal before the Tax Court and whether this would be satisfied on a standard that is less than the balance of probabilities, in my view, this issue should be addressed. …

[61] …[A] taxpayer should have the burden to prove, on a balance of probabilities, any facts that are alleged by that taxpayer in their notice of appeal and that are denied by the Crown. In most cases this should end the discussion of the onus of proof since the assumptions of fact made by the Minister in reassessing the taxpayer would generally be inconsistent with the facts pled by the taxpayer with respect to the material facts on which the reassessment was issued.

[62] If there are facts that were assumed by the Minister in reassessing a taxpayer and that are not inconsistent with the facts as pled by that taxpayer, it would also seem logical to require the taxpayer to prove, on a balance of probabilities, that these facts assumed by the Minister (and which are in dispute and are not exclusively or peculiarly within the Minister’s knowledge) are not correct. Requiring a taxpayer to disprove the facts assumed by the Minister in reassessing that taxpayer simply puts the onus on the person who knows (or ought to know) the facts. It also puts the onus on the person who indirectly asserted certain facts in filing their tax return that would be inconsistent with the facts assumed by the Minister in reassessing such taxpayer.

[63] Once all of the evidence is presented, the Tax Court judge should then (and only then) determine whether the taxpayer has satisfied this burden. If the taxpayer has, on the balance of probabilities, disproven the particular facts assumed by the Minister, based on all of the evidence, there is no burden to shift to the Minister to disprove what the Tax Court judge has determined that the taxpayer has proven.

Woods JA, in also dismissing the appeal, stated that she agreed with the comments of Stratas JA, who stated (at para. 70) that he found “much of what [Webb JA said] … to be thoughtful, illuminating and attractive”, but also (at para. 71) that he declined “to express a definitive opinion on the correctness of his views on this fundamental point.”

Vine Estate v. Canada, 2015 DTC 5063 [at 5880], 2015 FCA 125

onus does not shift to taxpayer to disprove neglect, carelessness, or wilful default

The taxpayer's return, prepared by his accountants, failed to show $1.07 million of capital gain and $2 million recapture of depreciation respecting Victoria Park. In the course of upholding the finding that this was a misrepresentation attributable to neglect, thus allowing the taxpayer to be assessed beyond the normal reassessment period (see summary under s. 152(4)(a)(i)), Webb JA disagreed with the trial judge's statement that "if the Minister establishes that there is a right to reassess after the expiration of the normal period, the onus will then shift to the taxpayer to show that the failure to include the amount in the return was not due to a misrepresentation attributable to neglect, carelessness or wilful default," stating (at paras. 24-25):

[T]he onus is on the Minister to establish, on a balance of probabilities, that the person filing the return … has made a misrepresentation, and … such the misrepresentation is attributable to neglect, carelessness, or willful default. There is no shifting onus.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i) filing amended return does not nullify previous lack of reasonable care/quaere whether neglect can be vicarious though outside accountants 528

Swirsky v. Canada, 2014 DTC 5037 [at 6723], 2014 FCA 36, aff'g 2013 TCC 73, 2013 DTC 1078 [at 431]

applying GAAR at confirmation stage doesn't shift onus

The trial judge found (at para. 71) that as the Minister had not applied GAAR until the confirmation stage, the Minister was required to show that the primary purpose of the share dispositions in issue was to obtain a tax benefit.

In the course of affirming the decision, Dawson JA explicitly declined to adopt para. 71 of the trial judge's reasons [ed: see Anchor Pointe].

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) no objectively reasonable expectation of taxable dividends 433
Tax Topics - General Concepts - Purpose/Intention no objectively reasonable income-producing purpose 83

Palmerino v. Canada (National Revenue), 2013 FC 919

onus on CRA to prove communications were part of criminal investigation

CRA began an official investigation of the taxpayer for tax fraud on 7 April 2008. The taxpayer made a request for information regarding the taxpayer, which CRA refused on the basis that the information pertained to a criminal investigation. The Privacy Commissioner upheld CRA's refusal.

Scott J granted the taxpayer's appeal in respect of any information that CRA could not establish was generated on or after 7 April 2008.

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Privacy Act - Paragraph 22(1)(a) onus on CRA to prove communications were part of criminal investigation 66

Newmont Canada Corporation v. Canada, 2012 DTC 5138 [at 7292], 2012 FCA 214

testimony sufficient to "demolish" assumptions

The Minister assumed that $7,559,684 of an amount claimed by the taxpayer as a bad debt dedution in respect of a loan held by it comprised interest of $183,336 of interest and principal as to the balance. The taxpayer's witness testified that the taxpayer had included $263,000 of interest in its retained earnings. The Court was satisfied that the witness's testimony, which the trial judge had stated was credible, was enough to demolish the Minister's assumptions regarding accumulated interest. The burden then fell the Minister to prove the assumptions, which was not done. Dawson JA stated:

In tax cases, the taxpayer has an initial onus to demolish the Minister's assumptions. This onus is met if the taxpayer establishes a prima facie case that the Minister's assumptions are wrong. Once the taxpayer establishes a prima facie case, then the burden shifts to the Minister to prove its assumptions on a balance of probabilities.

House v. Canada, 2011 DTC 5142 [at 6131], 2011 FCA 234

The taxpayer and his wife were the only shareholders of "Hunt River Camps/Air Northland Ltd." (Hunt River), a business from which the taxpayer had retired. The Minister reassessed the taxpayer on the assumption that he had received a $305,000 dividend to match a $305,000 reduction in Hunt River's assets in that taxation year. The taxpayer's explanation, introduced by his accountant who had recorded the reduction, was that a $305,000 investment account on Hunt River's books was found to not actually exist.

The Court of Appeal granted the taxpayer's appeal. Nadon J.A. stated (at para. 32):

The [trial judge] confused the appellant's initial onus to "demolish" the Minister's assumptions by adducing evidence that, prima facie, supported his position with the overall burden resting on the parties to prove that the investment had or had not been paid to the appellant in 2003.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Evidence credible oral evidence can be uncorroborated by documents 90

Khan v. The Queen, 2009 DTC 804, 2009 TCC 248 (Informal Procedure)

In a motion by the Crown to quash an appeal by the taxpayer on the basis that it had been filed too late, the onus was on the Crown to show that the appeal had been instituted too late.

Canada v. Anchor Pointe Energy Ltd., 2007 DTC 5379, 2007 FCA 188

assumptions can be changed at confirmation stage; mixed assumptions of fact and law struck

The Minister initially reassessed the taxpayer on the assumption that it had purchased seismic data for more than its fair market value, so that a portion of the expenditure did not qualify for deduction as CEE, and confirmed this reassessment on the assumption that the expenditure had not been made for a qualifying purpose so that it did not qualify as CEE.

In finding that the taxpayer had the onus of demolishing the different assumption (added to the Minister's pleadings by amendment) made by the Minister at the confirmation stage, Létourneau J.A. noted that the taxpayer's position (that this onus only applied to assumptions made prior to the filing by the taxpayer of its notice of objection) ignored the likely meaning of "assessment" in the relevant jurisprudence as the product of the process of assessment, reassessment and confirmation.

However, several of the Minister's assumptions contained mixed statements of fact and law, and the trial judge was correct to strike these paragraphs. Létourneau J.A. stated (at para. 26):

The Minister may assume the factual components of a conclusion of mixed fact and law. However, if he wishes to do so, he should extricate the factual components that are being assumed so that the taxpayer is told exactly what factual assumptions it must demolish in order to succeed. It is unsatisfactory that the assumed facts be buried in the conclusion of mixed fact and law.

Words and Phrases

Transocean Offshore Ltd. v. Canada, 2005 DTC 5201, 2005 FCA 104

Sharlow J.A. stated (at p. 5205):

"There may be situations where fairness would require that no onus be placed on a taxpayer to rebut a specific factual assumption made by the Crown. One example might be a fact that is solely within the knowledge of the Crown."

She went on to find that no such situation was before her.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) damages to lessor for advance lease repudiation were in lieu of rent 298

Canada v. Loewen, 2004 DTC 6321, 2004 FCA 146

General review of the jurisprudence on onus and assumptions prior to the enactment of s. 152(9).

The Crown was permitted to defend a reassessment it had made of the taxpayer (disallowing a portion of the taxpayer's capital cost allowance claims) on the basis of an argument that it asserted in its pleadings following the expiry of the time limit for reassessments, namely, an argument that the taxpayer was not entitled to deduct any capital cost allowance because it had not acquired its interest in the property in question for an income-producing purpose, so that the reassessment reducing the allowable capital cost allowance claims of the taxpayer was correct.

Canada v. Anchor Pointe Energy Ltd., 2003 DTC 5512, 2003 FCA 294

The portion of the Minister's Reply to the Notice of Appeal that stated that in reassessing the Minister had assumed that seismic data acquired by the taxpayer was used for exploration purposes, was struck, as such assumptions was only made by the Minister when the notice of confirmation was issued rather than at the earlier time of reassessment.

Capital Vision Inc. v. MNR, 2003 DTC 5054 (FCTD)

Before going on to find that the Minister had failed to establish that he had issued requirements under s. 231.2(1) for a disclosure of the names of third parties only in connection with his audit of the corporate applicant rather than in relation to the third parties, Heneghan J. stated (at p. 5065) that:

"The Minister, not the taxpayer, bears the burden of complying with section 231.2."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 231.2 - Subsection 231.2(1) 158

Roseland Farms Ltd. v. Canada, 2001 DTC 5392, 2001 FCA 167

In rejecting a submission that the shifting of the burden of proof to the taxpayer to disprove the Minister's assumptions can be prevented through an examination for discovery of the Minister's representatives if that examination reveals the assumption is not to be based on any reasonable grounds, Strayer J.A. stated (at p. 5393):

"It is the logic of the Johnston case and those which follow it that, once an assumption is stated, it is for the taxpayer to prove it wrong through his superior access to information about his personal affairs. The examination for discovery of the Minister's representative may help define and narrow the issues for trial, but it cannot be viewed as preliminary challenge to the reasonableness of the Minister's assumptions which, if successful, will preclude the burden from shifting to the taxpayer."

Cardella c. Canada, 2001 DTC 5251, 2001 FCA 39

Given that the Minister, in his Reply, pleaded by way of assumption that the taxpayer had no reasonable expectation of profit from his interest in two partnerships, the taxpayer needed to show that he had a source of income from either rental operations of the partnerships or from an adventure in the nature of trade. If he succeeded in doing so by way of prima facie case, the Minister's assumption would be demolished and the onus of proof would then shift to the Minister who would be obliged to establish the correctness of his assumptions.

C W Agencies Inc v. The Queen, 2000 DTC 2372 (TCC), aff'd 2002 DTC 6740, 2001 FCA 393

After noting that a Revenue Canada auditor who was reviewing the taxpayer's SR&ED claims, seemed "to have been unwilling to consider any evidence which was not presented to him in the form which he preferred", Bonner T.C.J. went on to note (at p. 2375):

"The onus which must be discharged by a taxpayer who appeals from an income tax assessment is decreased in weight where, as here, the assessment rests on an investigation which is affected by an attitude problem."

(The taxpayer nonetheless failed to establish that its software development project was not routine.)

Coffen v. The Queen, 97 DTC 5552 (Ont. Ct. J. (G.D.))

Sheppard J. noted that (at p. 5554) that in an income tax prosecution "the Crown must prove beyond reasonable doubt that each item of income sought to be taxed is properly subject to tax in accordance with tax law and each expense disallowed is properly disallowed in accordance with tax law".

Canderel Ltd. v. Canada, 98 DTC 6100, [1998] 1 S.C.R. 147

In the course of finding that a taxpayer, which amortized tenant inducement payments for financial statement purposes, was entitled to immediately expense those payments for tax purposes, Iacobucci J. stated (at p. 6100):

"On reassessment, once the taxpayer has shown that he has provided an accurate picture of income for the year, which is consistent with the Act, the case law, and well-accepted business principles, the onus shifts to the Minister to show either that the figure provided does not represent an accurate picture, or that another method of computation would provide a more accurate picture."

Hickman Motors Ltd. v. Canada, 97 DTC 5363, [1997] 2 S.C.R. 336

taxpayer demolished Minister's assumptions with uncontradicted testimony

Because the taxpayer's evidence was not challenged or contradicted by the Minister, the taxpayer had demolished the Minister's assumption and the burden shifted to the Minister. Because the Minister adduced no evidence whatsoever, the taxpayer was entitled to succeed.

Bosa Bros. Construction Ltd. v. The Queen, 96 DTC 6193 (FCTD)

The taxpayer acquired all the shares of a corporation ("Topaz"), whose ability to take an inventory write-down for an apartment building depended on establishing that the building had represented depreciable property to the previous parent of Topaz ("Darwai") prior to its transfer by Darwai to Topaz. Before finding that, in any event, the evidence established that the property in fact had been a depreciable property of Darwai, Nadon J. found that the burden of proof to establish that the Topaz property was not depreciable capital property rested on the Crown given that this was information that was in the Crown's power to obtain and not the taxpayer's, and given that the Crown had made an undertaking at discovery to obtain documentation regarding the characterization of the apartment building by Darwai.

CPL Holdings Ltd. v. The Queen, 95 DTC 5253 (FCTD)

Cullen J. (at p. 5258) applied the presumption that "the burden of proof ... rests with the tax department in the case of a provision imposing a tax obligation and with the taxpayer in the case of a provision creating a tax exemption" to find that, in this case, the burden rested with the taxpayer because it sought the intercorporate deduction under s. 112(1).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 55 - Subsection 55(2) s. 55(2) did not apply as purpose was creditor-proofing 153

Québec (Communauté urbaine) v. Corp. Notre-Dame de Bon-Secours, 95 DTC 5017, [1994] 3 S.C.R. 3

In the context of an extended discussion of the principles of statutory interpretation relevant to taxing statutes (in this instance, the Act Respecting Municipal Taxation (Quebec), Gonthier J. stated (p. 15):

"According to the general rule which provides that the burden of proof lies with the plaintiff, in any proceeding it is for the party claiming the benefit of a legislative provision to show that he is entitled to rely on it. The burden of proof thus rests with the tax department in the case of a provision imposing a tax obligation and with the taxpayer in the case of a provision creating a tax exemption."

Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Resolving Ambiguity 167

W. Hanley & Co. Ltd. v. The Queen, 90 DTC 6354 (FCTD)

At the time of reassessing the taxpayer, Revenue Canada indicated that it regarded the taxpayer's interest in a property as having been acquired in exchange for services to be provided by the taxpayer. In its Statement of Defence, the Crown pleaded that the taxpayer had acquired its interest in the property with the primary or dual intent of turning it to account for profit as soon as it had an opportunity to do so, that the taxpayer was engaged in a real estate business, and that the taxpayer had the first opportunity to become selling agent for the sale of suites. Collier, J. held that these pleadings transgressed the principles that the taxpayer must clearly be made aware of the basis upon which the Minister sought to tax it, and that the onus was on the Minister to establish that the taxpayer realized its gain on income account.

First Fund Genesis Corp. v. The Queen, 90 DTC 6337 (FCTD)

The taxpayer was assessed for Part VIII tax on the basis that its scientific research and experimental development credit did not include an amount designated pursuant to s. 194(4) by a company ("Dell"). Although the placing of the onus on the Crown was predicated on there being full disclosure to the taxpayer of the precise findings of facts and rulings of law which gave rise to the controversy, here the Crown had provided the taxpayer with all the documents (which the Crown in turn had obtained from Dell) on which the Crown had relied in making its assessment. Accordingly, there were no circumstances "of such an exceptional nature as to justify at this stage a departure from well-established and well-recognized rules applicable to income tax appeals", so as to justify placing the onus on the Crown (p. 6341).

Youngman v. The Queen, 90 DTC 6322 (FCA)

It was not sufficient, in order to displace the onus on the taxpayer arising as a result of the assumption pleaded by the Minister that a shareholder benefit to the taxpayer was to be computed on the basis of a notional 9% return on the corporation's equity in a home, that the selection of a 9% rate of return by the Minister may have been somewhat arbitrary. "The assumption of the Minister could be correct even if it was made for a wrong reason" (p. 6325).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) benefit reduced by interest-free loan made by shareholder 259

The Queen v. Mattabi Mines Ltd., 89 DTC 5357 (FCTD), aff'd 92 DTC 6252 (FCA)

The Minister's Statement of Claim contained an assumption that the taxpayer's reagents were not held for sale, whereas in fact the assessor had allowed the taxpayer to claim the inventory allowance on its copper sulphate reagent in the mistaken belief that the taxpayer sold its copper sulphate. This error (which did not prejudice the taxpayer) did not cause the onus to shift to the Minister.

Grohne v. The Queen, 89 DTC 5220 (FCTD)

Because the conferral of a s. 15(1) benefit was not among the Minister's assumptions at the time of reassessment, the onus was on the Crown at trial to establish the taxpayer's tax liability on this basis.

Smith, Kline & French Laboratories Ltd. v. A.G. (Can.), 89 DTC 5205 (FCTD)

There is a common law presumption in support of public access to the courts and court records, and the burden of persuading the court that access should not be provided is upon the person who seeks to deny it.

Interprovincial Co-operative Ltd. v. The Queen, 87 DTC 5115, [1987] 1 CTC 222 (FCTD)

Since the basis of disallowing the taxpayer's CCA claims was made known to the taxpayer both in the pre-pleading period and the pleading period (namely, that the property had not been acquired for the purpose of producing income), there was a positive onus on the taxpayer to prove that the property had been acquired for the purpose of producing income.

Wise v. The Queen, 86 DTC 6023, [1986] 1 CTC 169 (FCA)

Since the Minister in the Federal Court of Appeal was trying to support his assessments on grounds that were different than those upon which they were made, the Minister had the burden of establishing the correctness of his assessments.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base deposit 61

The Queen v. Bassani, 85 DTC 5232, [1985] 1 CTC 314 (FCTD)

The Crown must plead secondary intention expressly in order to shift the burden of proof with respect to secondary intention to the taxpayer.

Tony Mele Incorporated v. The Queen, 85 DTC 5196, [1985] 1 CTC 252 (FCTD)

The onus on the taxpayer to dislodge the assumptions of the Minister is not satisfied by establishing that the Revenue Canada auditor was unable to get facts to support his assumptions.

Krassman v. The Queen (1979), 102 D.L.R. (3d) 262 (FCTD)

It is rare for there to be contradictory evidence in a tax case and accordingly, although the Court should not disbelieve witnesses without valid reasons, their testimony should be tested for its logic and consistency.

Farmer Construction Ltd. v. The Queen, 83 DTC 5215, [1983] CTC 198 (FCTD)

In a case where the only issue was whether an asset disposed of was a capital asset or a trading asset, then the onus of proof rested on the taxpayer even though the Minister, in pleading that the transaction was on income account, did not list specific assumptions to support that conclusion. The taxpayer was fully aware of the case he had to meet.

Hillsdale Shopping Centre Ltd. v. The Queen, 81 DTC 5261, [1981] CTC 322 (FCA)

"If a taxpayer, after considering a reassessment made by the Minister, the Minister's reply to the taxpayer's objections, and the Minister's pleadings in the appeal, has not been made aware of the basis upon which he is sought to be taxed, the onus of proving the taxpayer's liability in a proceeding similar to this one would lie upon the Minister." Here, however, the taxpayer was aware of the basis of the Minister's assessment.

Kit-Win Holdings (1973) Ltd. v. The Queen, 81 DTC 5030, [1981] CTC 43 (FCTD)

"If the Minister has failed to allege as a fact an essential ingredient to the validity of the assessment under the applicable statutory provision there is no onus on then the taxpayer to disprove that fact." Here, there had been a failure to plead that a syndicate had, at the time of acquisition of real property, the intention of possibly disposing of the property at a profit and that that possibility was a motivating factor that induced the purchase. Instead, the Minister had only pleaded that the plaintiff "was always willing to sell the said land building provided a reasonable profit could be realized." There, accordingly, was no onus on the plaintiff to disprove secondary intention.

The Queen v. Farmparts Distributing Ltd., 80 DTC 6157, [1980] CTC 205 (FCA)

failure of Minister to allocate

Although the Court agreed that a portion of the payment in question fell within the language of s. 212(1)(d)(i), the Minister had taken an all-or-nothing approach in his pleadings. Since the Minister had not succeeded in establishing the assumptions set out in his pleadings, his appeal failed, notwithstanding his partial success on the merits.

Simpson v. The Queen, 79 DTC 5336 (FCTD)

In an interpleader action, the onus was on the Crown to show that the owner of an aircraft, which had been seized on behalf of the Department, was in fact the judgment debtor.

Quality Chekd Dairy Products Association v. MNR, 67 DTC 5303 (Ex Ct)

Because the Minister had failed in its pleading to adduce evidence as to the proper apportionment in the amount of a fee received by the taxpayer between a royalty for a certification mark, and the provision by it of services, the full amount of the fee was not subject to withholding tax.

See Also

Lohas Farm Inc. v. The Queen, 2019 TCC 197

no burden of displacing an assumption as to a factual matter which the taxpayer could not be reasonably expected to know

Before going on to find that the appellant (Lohas) had met its burden of establishing that the buyers of iPhones that it then exported were not resellers to it of the iPhones, but acted as agents of Lohas in purchasing the iPhones, D’Auray J stated (at paras. 36-37):

I agree with Justice Webb’s comments in Sarmadi and Justice Owen’s in Morrison. The persuasive burden relating to the correctness of an assessment should not shift between the taxpayer and the Minister with respect to facts that are within the knowledge of the taxpayer. As in any civil case, once the evidence is heard, the judge must make a determination as to whether, on a balance of probabilities, the taxpayer has met the burden of proof.

However, given that the test set out … in Hickman ... is still applied by the Courts. I will apply it in this appeal. I should note that my decision would be no different had I applied the approach set out by Justice Webb in Sarmadi and Justice Owen in Morrison.

She went on to find (at para. 46) that Lohas did not have the burden of disproving a pleaded assumption of the Minister that Apple “was not aware” that the buyers were purchasing iPhones to resell them to Lohas, stating that:

[T]he Minister cannot plead as an assumption a fact that the taxpayer could not reasonably be expected to either prove or disprove. Therefore, this assumption does not benefit from the presumption of correctness.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Agency buyers made purchases of iPhones as agents for a grey market reseller 407
Tax Topics - Excise Tax Act - Regulations - Input Tax Credit Information (GST/HST) Regulations - Section 3 - Paragraph 3(c) - Subparagraph 3(c)(ii) missing names in receipts issued by vendor were cured by memo maintained by the purchaser 199
Tax Topics - Excise Tax Act - Section 169 purchases were made as agent for grey market registrant 260

Monsell v. The Queen, 2019 TCC 5 (Informal Procedure)

onus on CRA where it, rather than taxpayer, had access to the records underlying a reassessment

The taxpayers (a husband and wife) received payments from a corporation that had been reassessed for its 2005 to 2007 taxation years and had not objected thereto. Their only ground of appeal to s. 160 assessments was that these “underlying” reassessments were incorrect.

D’Auray J quoted (at para. 22) the principle in Mignardi that

where the facts concerning the underlying reassessments are exclusively or peculiarly within the knowledge of the Minister, the onus will shift to the Minister to show the correctness of the underlying reassessments

before finding that the onus was on the Minister to demonstrate the correctness of the underlying reassessments for the 2005 and 2006 years. This was so because the taxpayers did not have access to the corporate records for those years, whereas CRA had been given such documents and then lost them. The Minister failed to discharge this onus.

However, for the 2007 year, no audit was performed and the Minister reassessed solely on the basis of the information contained in the corporate tax returns. Thus, the onus instead was on the taxpayers to demonstrate that this reassessment was incorrect, which they failed to do.

Since the amount of this underlying reassessment for 2007 was greater than the amount of the two payments made to the taxpayers, their s. 160 assessments were upheld.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 160 - Subsection 160(1) CRA has the onus of substantiating assessments underlying s. 160 assessments where it had superior records access 300
Tax Topics - Income Tax Act - Section 125 - Subsection 125(3) - Paragraph 125(3)(b) SBD denied because no agreement made 92

Morrison v. The Queen, 2018 TCC 220, aff'd sub nom. Eisbrenner v. Canada, 2020 FCA 93

taxpayers had the burden of disproving the Minister’s assumptions about their gift tax shelter about which they knew virtually nothing

One of the taxpayers (“Eisbrenner”) participated in the “CHT Program” under which they or other clients would make a cash donation to a registered charitable foundation (Foundation A) , apply to be considered as a potential Class A beneficiary of CHT, which was a trust, CHT would then distribute certificates to the successful applicant supposedly representing entitlements to pharmaceuticals, and the client would donate those certificates to a registered charitable foundation.

Eisbrenner had minimal knowledge of how the CHT Program worked, and submitted that since he did not have knowledge of most of the factual matters assumed by the Minister, as a matter of procedural fairness he should not be required to demolish such assumptions and the Minister should instead bear the burden of proof with respect to them.

Before turning to this question, Owen J took up the invitation of Stratas JA in Sarmadi for the Tax Court to provide its insights on the views expressed by Webb JA in that case on the burden of proof, and then essentially agreed with those views. He noted (at para. 88) that Johnston, [1948] S.C.R. 486, had not said “anything about … the shifting of the persuasive burden to the Minister,” that this was “explained by the fact that only one party can bear the persuasive burden in respect of an issue such as the correctness of an assessment” and that comments of L’Heureux Dubé J in Hickman to a different effect “were obiter dicta” (para. 93).

Turning then to the above submission of Eisbrenner, Owen J stated (at paras 118, 119 and 120):

The Appellants consciously chose to participate in the Programs with little or no knowledge of what went on behind the curtain, so to speak. In such circumstances, it is not unfair to the Appellants to allow the Minister to assume what went on behind the curtain.

… By participating in the Programs without further inquiry, the Appellants accepted the risk that the facts behind the curtain were not what they expected them to be.

I therefore conclude that the Minister’s assumptions of fact … are to be taken as true … and that in accordance with the principles stated in House, the taxpayer must present at least a prima facie case to demolish those assumptions of fact. …

As Eisbrenner was unable to do so with respect to the donation by him of the certificates, the denial by the Minister of charitable credits for their donation was confirmed.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts gift was not vitiated by benefits 548
Tax Topics - General Concepts - Fair Market Value - Other Ontario list price of generic pharmaceuticals substantially exceeded their FMV in the international market 211

Agence du revenu du Québec v. Stamatopoulos, 2018 QCCA 474

onus shifted to ARQ once the taxpayer had demonstrated that he had business deaings with issuer of mooted invoice

A taxpayer (Stamatopoulos) serviced clothing manufacturers by securing sewing services for clothes that then were delivered to the manufacturer. He checked the GST and QST registration numbers of the subcontractors and paid the invoices delivered in their name to him once he, in turn, had been paid by the manufacturer. The QST paid by him was not remitted by the subcontractors, and the ARQ position was that he was not entitled to input tax refunds because the persons in whose names the invoices were issued were not the persons who had actually rendered the sewing services to him.

In confirming the position below that the invoices received by Stamatopoulos satisfied the documentary requirements for claiming ITRs, Marcotte JCA proceeded on the basis (at para. 54) that:

[W]here the taxpayer has discharged the taxpayer’s initial burden of proving that the invoices in fact were issued by a person with whom the taxpayer dealt directly in a genuine commercial transaction, it then falls on the tax authorities to prove, on the balance of probabilities, that the person with whom the taxpayer dealt directly did not act as a “supplier” or as an “intermediary.”

The ARQ had not met this onus.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Regulations - Input Tax Credit Information (GST/HST) Regulations - Section 2 - Intermediary ARQ failed to establish that a named supplier to the taxpayer did not act as a supplier or intermediary 422
Tax Topics - Excise Tax Act - Section 169 - Subsection 169(4) burden shifted to ARQ once taxpayer showed that it had business dealings with suppliers named in invoices 246

Custodio v. The Queen, 2018 CCI 47

onus of Crown to demonstrate compliance with s. 227.1(2)(a) irrespective of taxpayer's pleadings

After noting that proof of the requirement in s. 227.1(2)(a) was normally demonstrated by the deposit of the certificate for the delinquent amount and of "a writ of seizure and sale or a report of the default by the bailiff (para. 29)" Ouimet J noted that since the Crown had done none of this, the taxpayer’s appeal was allowed. It did not matter that the taxpayer had failed to put this failure in issue in his pleadings, as the onus was on the Crown throughout to demonstrate compliance with s. 227.1(2).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 227.1 - Subsection 227.1(2) - Paragraph 227.1(2)(a) failure of Crown to tender documents proving the unsatisfied-execution requirement 285

Pellerin v. Agence du revenu du Québec, 2017 QCCA 1339

proof that auditors got bonuses for assessing would not change the burden of proof

After stating (at para. 16) that s. 1014 of the Taxation Act (similar to ITA) “provides that the burden of proof rests on the taxpayer who contests a notice of assessment,” the Court affirmed that finding below that it would not change such burden on the taxpayer if the ARQ auditor instigating the assessment under appeal would receive a resulting bonus, the Court stated (at para. 20, TaxInterpretations translation):

The judge did not err in affirming that the burden on the appellant cannot be reversed on the sole basis of proof of a bonus system related to the audit process. Such proof would not demonstrate error in the facts on which the respondent relied in making such assessments and would thus not constitute prima facie proof of the incorrectness of the notice of assessment.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(8) statement of onus embedded in s. 152(8) 75

Gerbro Holdings Company v. Canada, 2016 TCC 173, briefly aff'd 2018 FCA 197

no taxpayer burden to displace assumptions of mixed fact and law

After stating (at para. 67) that "assumptions of law or mixed fact and law are not binding on this Court," Lamarre ACJ stated (at para. 73):

The Respondent must now cope with assumptions of mixed fact and law in her reply that are for all intents and purposes ineffective in placing on the Appellant the burden of proving that its investments in the Funds were portfolio investments... .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 94.1 - Subsection 94.1(1) offshore hedge fund investments were chosen in the main for commercial reasons (e.g., manager reputation), so that s. 94.1 did not apply 345
Tax Topics - Statutory Interpretation - Hansard, explanatory notes, etc. Minister's statement was false 120
Tax Topics - Other Legislation/Constitution - Federal - Tax Court of Canada Rules (General Procedure) - Section 145 - Subsection 145(3) expert's report did not include all the underlying data 109

Szymczyk v. The Queen, 2014 TCC 380 (Informal Procedure)

Minister's "partly arbitrary" assumptions did not remove onus from taxpayer

The taxpayer's employer, General Motors, frequently assigned new vehicles to its executives and senior managers, the taxpayer included, in order to promote the vehicles and identify shortcomings in the models. The Minister authorized GM in 1982 to use a simplified method for calculating the value of employee benefits, which was meant to approximate the value of the personal use for the vehicles. Since then, s. 6(1)(k) was enacted, setting out the formula applicable to the taxpayer's situation.

In affirming that the Minister could assess the taxpayer for 2008-2009 for an imputed benefit under s. 6(1)(k) on a basis contrary to the authorization, Woods J dismissed the taxpayer's argument that, because the authorized method dispensed with detailed record keeping, the Minister should have the onus of proving the cost of the vehicles, and the kilometers driven for personal use. This argument relied on the authorization being valid for the relevant taxation years, and Woods J had already found it wasn't - see summary under General Concepts - Estoppel.

Regarding the taxpayer's further argument that the Minister's assumptions were "arbitrary, capricious, and not founded in any facts," Woods J stated (at para. 58):

I agree with Mr. Szymczyk that the assumed facts are partly arbitrary, but this is not a reason for the Crown to bear the burden of proof. The burden of proof with respect to pleaded assumptions is placed on taxpayers because the facts are usually within the taxpayers' knowledge or control.

However, the taxpayer's appeal with respect to the Minister's assessment of an imputed benefit under ss. 6(1)(e) and 6(2) was allowed as the taxpayer was delivered a new vehicle every three months, the Minister's assumption that the taxpayer had 20,004 kilometers per year of personal use did not recognize that "the legislation requires that personal use be calculated separately for the periods that each automobile was made available" (para. 70), and no evidence as to actual personal use was advanced.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Estoppel Minister's authorization should not be set aside too readily as being contrary to law 317
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(k) late designation not permitted/rule-of-thumb method invalidated by s. 6(1)(k) 189
Tax Topics - Income Tax Act - Section 6 - Subsection 6(2) separate personal use kilometers required for each vehicle used in year 169

0742443 B.C. Ltd. v. The Queen, 2014 DTC 1208 [at 3811], 2014 TCC 301, aff'd 2015 DTC 5115 [at 6304], 2015 FCA 231

Minister's pleading of assumptions of law does not relieve taxpayer from entering a case

Respecting an alleged faulty Reply of the Minister, C Miller J stated obiter (at para. 32):

If a reply is faulty by pleading law as an assumption, that does not somehow relieve me of my responsibility to consider evidence upon which I am to reach my own conclusion with respect to the law. It does, however, relieve the Appellant from having to demolish that assumption, but it does not allow the Appellant to simply step back and not enter a case. Perhaps this could be an approach where the only assumptions made by the Respondent are assumptions of law.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 125 - Subsection 125(7) - Specified Investment Business storage charges were property income, cf. hotel revenue 243

Bekesinski v. The Queen, 2014 DTC 3604 [at 1169], 2014 TCC 245

unspecific pleadings were more readily demolished, improbable allegations treated with greater care

The appellant contended that he had resigned as director in 2006, so that an assessment under s. 227.1(1) in 2010 was out of time. The Minister alleged that the appellant's notice of resignation was backdated. In the course of her decision, Campbell J rejected the taxpayer's argument that, because fraudulent backdating is an "improbable" or "grave" allegation, the Minister faced a heightened onus. The allegation was not especially improbable but, even if it were, the only burden of proof in the civil context is the balance of probabilities. There are various comments in the caselaw about exercising "greater care" where there are serious or dubious allegations. These comments do not establish a heightened onus, but rather acknowledge that improbable allegations will, by their very nature, need clearer proof in order to meet the balance of probabilities (para. 24).

However, the Minister had not pleaded backdating - only that the appellant had continued as a director – nor did she plead lack of due diligence. Accordingly, explanations of the appellant which were plausible were sufficient to demolish the Minister's assumptions notwithstanding that "in all likelihood, the Appellant backdated the Resignation" (para. 45).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 227.1 - Subsection 227.1(4) appellant, who likely backdated resignation, was plausible enough to demolish assumptions 94

Health Quest Inc v. The Queen, 2014 TCC 211 (Informal Procedure)

mixed assumptions of fact and law

The appellant ("Health Quest") distributed footwear for the relief of various disabling conditions of the foot.. The Minister reassessed the taxpayer on the basis that many of the shoes sold were not zero-rated supplies under s. 24.1 of Part II of Schedule VI of the ETA. The Minister's pleadings stated that the appellant made zero-rated supplies of footwear "which were specially modified...or were specially designed...for persons with physical disabilities," and then stated:

the Appellant also supplied other products which were not zero-rated pursuant to Schedule VI of the Act; and

during the periods under appeal, the Appellant failed to collect tax of not less than $42,274.72 on its supply of products which were not zero-rated pursuant to Schedule VI of the Act.

Campbell J found that, as these were not assumptions of fact but rather of mixed fact and law, the Minister was not entitled to rely on them (as per Anchor Pointe). The Minister was not otherwise able to prove that s. 24.1 did not apply, so that Health Quest's appeal was allowed.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Schedules - Schedule VI - Part II - 24.1 insufficient product design evidence 185

Galachiuk v. The Queen, 2014 DTC 1153 [at 3494], 2014 TCC 188

prima facie proof of due diligence shifts the onus to the Minister

The taxpayer failed to report $683 of income for 2008 and $436,890 for 2009. The 2009 income was not subject to a s. 163(1) penalty if the taxpayer established a due diligence defence for 2008. (See summary under s. 163(1).)

Graham J found that the taxpayer prima facie established due diligence for 2008 in showing the steps he took to prepare his return and by demonstrating that the unreported amount was tiny. The taxpayer's 2007 return contained a similar omission to the 2008 return, which might have thrown the diligence for the 2008 return into question. However, although the taxpayer could not recall when he received the 2007 reassessment, his prima facie proof had shifted the onus to the Minister to show that the taxpayer had likely received his 2007 assessment early enough to put him on guard when preparing his 2008 return, which the Minister had not done. It was "not sufficient for the [Minister] to simply speculate what may have occurred and then sit back and wait for Mr. Galachiuk to prove otherwise" (para. 19).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 163 - Subsection 163(1) due diligence is available for the first relevant year, not only the second 242

Drouin v. The Queen, 2014 DTC 1016 [at 2564], 2013 TCC 139

late disclosure of assumptions does not reverse onus

In the course of successfully demonstrating that a franchise agreement and related arrangements with a Barbados corporation reflected a genuine business (see summary under s. 3), the taxpayer argued that the Minister's failure to disclose her assumptions in the notice of assessment meant that she should not be entitled to rely on them.

Bédard J disagreed. The assumptions were not disclosed until 21 months later, in the Minister's reply to the taxpayer's notice of appeal. However, Orly Automobiles establishes that a delay is not a basis in itself for shifting the burden away for the taxpayer.

Moreover, there had been no prejudice to the taxpayer, who had correctly guessed the basis for reassessment and had filed his appeal accordingly.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 3 - Business Source/Reasonable Expectation of Profit arrangement looking like Barbados tax shelter was in fact genuine business 118

Dr. Mike Orth Inc. v. The Queen, 2013 DTC 1110 [at 588], 2013 TCC 123 (Informal Procedure)

The taxpayer simultaneously sought to rebut the Minister's assumptions relating to its appeal and to claim privilege over documents closely related to those assumptions. Rip CJ stated (at para. 20):

Counsel is entitled to vigorously challenge the evidence of the taxpayer by cross-examination. A taxpayer claiming privilege in cross-examination on matters he or she leads in examination-in-chief, thus limiting the cross-examination, must consider possible consequences. A taxpayer claiming privilege who wishes to shift the onus must still make a case that will survive cross-examination.

Poulin v. The Queen, 2013 DTC 1102 [at 545], 2013 TCC 104

Hershfield J found that the Minister's affidavit was inadequate to establish under s. 244(10) that the taxpayer's Notice of Objection had been filed after the applicable deadline, chiefly because the affidavit dealt with the wrong tax centre. The Minister's affidavit was based on the timestamp for the Notice's arrival at the Burnaby-Fraser Tax Services Office, rather than the tax centre in Surrey, BC where the taxpayer had sent the Notice. The taxpayer's own testimony as to the mailing date was credible. Hershfield J therefore granted the taxpayer's application to extend the time to file a Notice of Objection.

In reaching this conclusion, Hershfield J noted that the situation was analogous to Carcone, which dealt with a Notice of Assessment. Hershfield J stated (at para. 27):

The onus is not different in regard to the date of receipt of a notice of objection. Only the CRA would be possessed of such information.

Mignardi v. The Queen, [2013] GSTC 39, 2013 TCC 67 (Informal Procedure)

onus on Minister where taxpayer had no financial involvement

The Minister assessed the appellant for director's liability in respect of a corporation that had not remitted net tax for reporting periods ending on and after July 1, 2000. The appellant had been excluded by the franchisor of the corporation's business from any input into the financial affairs of the corporation after October 2001, and from any involvement at all after July 2002. The applicant had no access to the corporation's records, and CRA would not provide any background as to how it had computed the corporation's liability. Paris J found that this was sufficient to shift onto the Minister the burden of proving the correctness of the corporation's assessment, and that this burden had not been discharged.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 323 - Subsection 323(1) onus on Minister where taxpayer had no financial involvement 114
Tax Topics - Excise Tax Act - Section 323 - Subsection 323(3) failure to monitor other director 71
Tax Topics - Excise Tax Act - Section 323 - Subsection 323(5) no constructive resignation 63
Tax Topics - Income Tax Act - Section 160 - Subsection 160(1) onus on Minister where taxpayer had no financial involvement 114

Pawlak v. The Queen, 2012 TCC 355 (Informal Procedure)

Webb J found that the obligation of the Minister to take unclaimed input tax credits into account in an HST audit under s. 296(2) of the Excise Tax Act extends to unclaimed ITCs that arose before the normal limitations period for claiming ITCs (see summary under s. 296(2)).

In the course of his reasons, Webb J noted that the Minister was not entitled to rely on gaps in the appellant's documentation, because the Minister had not made any assumptions regarding documentation, and the only evidence on that point indicated that there was documentation.

Basi v. The Queen, 2012 DTC 1282 [at 3836], 2012 TCC 345

Webb J. found that the taxpayer was successful in demolishing the Minister's assumptions relating to the proceeds of disposition of two properties. The taxpayer's evidence that she received $320,000 for one property rather than $340,000 was corroborated by testimony from the purchaser, and from the lawyer who handled the transaction.

On the second property, the taxpayer contended that her alleged $650,000 of proceeds were actually $550,000, based on a $100,000 promissory note that was never paid. Webb J. accepted the taxpayer's testimony, also corroborated by the lawyer, that the $100,000 was linked to rezoning the property, that no rezoning was done, and consequently no payment on the note was received or pursued. Accordingly, the $100,000 note was not consideration for the property.

Brewster v. The Queen, 2012 DTC 1178 [at 3451], 2012 TCC 187 (Informal Procedure)

Webb J. found that it was improper for the Minister to assume that investments which the taxpayer acquired with RRSP funds were not qualified investments. Whether something is a qualified investment is a mixed question of fact and law, and the Minister should have assumed the facts necessary to support that conclusion. Moreover, the conclusions themselves were vague - it was unclear precisely which investments were thought not to be qualified investments. Given the finding that no assumptions had been made, there was no onus on the taxpayer to demolish any assumptions, and the Minister's reassessment was vacated.

SoftSim Technologies Inc. v. The Queen, 2012 DTC 1187 [at 3473], 2012 TCC 181

The taxpayers' former counsel had reached a settlement agreement with the Minister, which the taxpayers argued had not been authorized by them. In the course of finding that the settlement agreement was in fact authorized and should be enforced, D'Auray J. stated (at para. 26):

Whether a mandate was given by the appellants to settle their appeals is a question of fact. The respondent has the burden of establishing the existence of the mandate.

Marshall v. The Queen, 2012 DTC 1068 [at 2815], 2012 TCC 21

The taxpayer was the sole shareholder and director of Internorth Limited ("IL") and a majority shareholder and director of Internorth Construction Company ("ICC"). ICC ran a construction business, and IL was incorporated to manage ICC. The minister assessed the taxpayer for unremitted source deductions, in his capacity only as director of IL, in respect of salaries and wages paid to ICC employees. After noting that IL had neither the financial resources nor backing to pay ICC's employees without reimbursement from ICC, Webb J. stated (at para. 51):

Since the Respondent made the assumption that ICC did not reimburse IL, the Appellant did not have to challenge this assumption but could rely on it to dispute the other assumption that IL paid the employees of ICC.

The taxpayer's reliance on this assumption, along with IL's and ICC's financial records which recorded all the salaries as being paid by ICC, led Webb J. to find that the taxpayer had made a prima facie case to demolish the Minister's key assumptions in the case, which the Minister did not subsequently meet the onus of proving.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 153 - Subsection 153(1) - Paragraph 153(1)(a) not liable for amounts paid as agent 142

Szollosi Bens v. The Queen, 2011 TCC 240

Webb J. quashed the Minister's motion to dismiss the taxpayer's appeal from assessments under the Income Tax Act and Excise Tax Act, even though the taxpayer had failed to prosecute the appeals with due dispatch (he did not even appear at the hearing for this motion). Because the Minister was seeking to impose penalties under s. 163(2) of the ITA and s. 285 of the ETA, the burden remained with the Minister to prove that penalties were warranted. The taxpayer's inaction was not enough to support an inference that penalties were no longer in issue.

Rail v. The Queen, 2011 DTC 1190 [at 1057], 2011 TCC 130

The Minister disallowed a number of the taxpayer's expenses allegedly connected to his dentistry practice so as to reduce the taxpayer's profit margin to the Canadian average. McArthur J. stated (at para. 35) that this was not acceptable because a reassessment cannot ignore the taxpayer's individual circumstances. He also stated (at para. 36):

The appellant clearly demolished [with documentary evidence] the Minister's assumptions , on which he had based himself in disallowing the expenses in issue. The appellant has prima facie shown that the majority of the expenses has been incurred for the purpose of earning an income and that they had not been claimed twice. The burden of proof has thus shifted to the respondent.

As the Minister had not introduced evidence to discharge that burden, the taxpayer's appeal was allowed.

Richard A. Kanan Corporation v. The Queen, 2011 DTC 1168 [at 928], 2011 TCC 211 (Informal Procedure)

The Minister disallowed the taxpayer's deduction of certain legal expenses. The only documentary evidence provided by the taxpayer as to the nature of the legal services were the accounts of the firm stating only "For Legal Services Rendered." In response to a Crown submission that, in order for the taxpayer to discharge the onus on it to establish deductibility of the fees, it was required to provide its complete legal file, Campbell J stated (at para. 21):

The Court will require descriptions of the tasks undertaken by the lawyers, and the amounts charged for those tasks. In most cases, the Court will not, and should not, require the Appellant to reveal items such as complete legal advice memoranda, unexecuted drafts of contracts, or details of its discussions with counsel... .

In response to a submission of the Crown in the alternative that some limited testimony of a lawyer from the firm on behalf of the taxpayer engaged the doctrine of implied waiver of privilege, Campbell J. found (at para. 24) that, in general, "the concerns of fairness and consistency operate to prevent litigants from relying on parts of privileged communication while using the privilege to shield others." However, in the case of an appeal from a reassessment, the taxpayer is effectively forced by the Minister to reveal privileged information. On that basis, Campbell J. stated (at para. 27):

I accept that, in general, it is problematic to allow a litigant to pick and choose the privileged information to be disclosed. However, in this context it is both fair and reasonable to expect a taxpayer to reveal enough information to satisfy the Court and CRA as to the nature of the legal expense, while keeping the specifics of the lawyer's advice confidential.

Blais v. The Queen, 2011 DTC 1008 [at 55], 2010 TCC 195 (Informal Procedure)

The taxpayers refused to produce their documents before the Minister filed its Notices of Assessment, but did produce them after filing their Notices of Appeal. The documents differed in some respects from the facts assumed in the assessment, and the Minister altered his assumed facts for the appeal accordingly.

Jorré J. found that the onus was still on the taxpayer to disprove the new assumptions even though they were made after the confirmation of assessment. At para. 29: "It would be illogical if the effect of these assumptions of fact, which were made after the Notices of Appeal were filed and which lessen the appellant's burden, actually shifted the burden of proving [the disputed expense] amount to the Minister."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 partnership cannot deduct salary paid to a partner 53

Husky Oil Limited v. Canada, 2010 DTC 5089 [at 6887], 2010 FCA 125

Sharlow, J. A. noted (at para. 52) that as the Minister had assessed the taxpayer under s. 87(4) on the basis that shares received by it on an amalgamation had a nil fair market value, the onus would have shifted to the Minister to establish the fair market value of those shares if the taxpayer had argued that the judge should take judicial notice of the fact that, under the terms of the shares received, they presumably would have had a fair market value of greater than nil.

4528957 Manitoba Ltd. c. M.R.N., 2009 DTC 1218, 2009 TCC 298

The Minister assessed the taxpayer under s. 153(1) of the Income Tax Act and the taxpayer filed a Notice of Objection under the Canada Pension Plan Act, believing the assessments relate to Canada Pension Plan matters. The Minister's motion to dismiss the appeal for being brought under the wrong Act was dismissed given that the Minister had put forward no assumptions of fact to support the reassessment either in the Minister's reply or at the hearing, and in light of the procedural delays and difficulties the taxpayer (who was self-represented) had encountered.

Douthwright v. The Queen, 2007 DTC 1614, 2007 TCC 560 (Informal Procedure)

Given that the Crown had not made any assumptions of fact as to what portion of the reimbursement amounts made by the taxpayer were on account of capital, and had not lead any evidence on such allocation, the Crown had failed to satisfy the onus of proof on it and the deduction of the amounts under paragraph 8(1)(f) could not be denied on this basis.

Parker Brothers Textile Mills Limited v. The Queen, 2007 DTC 610, 2007 TCC 74

In finding that all of the fee paid by the taxpayer should be treated as deductible under paragraph 20(1)(dd), Hershfield J. stated (at para. 23):

"Still, had the Respondent raised an allocation issue I would have been prepared to deal with it on the basis that some part of the amount paid was not for a site investigation. The burden of proof in respect of such issue would arguably fall on the Respondent since no specific assumptions were made as to what the services provided were. However, not only did Respondent's counsel not pursue the issue of allocation, she also made it clear at the hearing that there was no alternate position being taken by the Respondent as to that possibility. Further, there was no alternative argument made as to the reasonableness of the expenditure as a site investigation expenditure."

Cloverdale Paint Inc. v. The Queen, 2007 DTC 243, 2006 TCC 628

The wholly-owned U.S. subsidiary of the taxpayer accumulated a large balance owing to the taxpayer as a result of its purchase of paint inventory over the years. In the taxation year in question, the subsidiary was in financial difficulty. MacArthur J. found that the taxpayer had shown that the "liquidation" method (under which an allowance for doubtful accounts was deducted equal to the difference between the amount owing and the net realizable value of the subsidiary's assets) was a reasonable method for computing the allowance, and that the burden then shifted to the Crown, who failed to provide any evidence as to why the liquidation approach was not acceptable.

Hawa v. The Queen, 2007 DTC 28, 2006 TCC 612 (Informal Procedure)

The Reply of the Crown to the taxpayer's Notice of Appeal with respect to an assessment that treated losses the taxpayer sustained in securities trading as being on capital account, referred only to the assumption of the Minister as to the amount of the non-capital losses sustained by the taxpayer. Bowman C.J. indicated (p. 29) that this was "a totally inadequate pleading" and that he "might have been prepared to entertain a motion to allow the appeal because the reply cast no onus on the appellant to rebut any assumptions and it asserts no new facts that would support the assessment".

Anchor Pointe Energy Ltd v. The Queen, 2006 DTC 3365, 2006 TCC 424

The Minister originally had reassessed the taxpayer on the basis that it was entitled to claim a deduction in respect of the fair market value of seismic data equal to the data's fair market value, and then confirmed the notice of reassessment on the basis that the expenditures in question did not qualify as Canadian exploration expense. Bowman C.J. found that the taxpayer did not have the onus of disproving new "assumptions" made by the Minister at the time of issuing the notice of confirmation.

Crystal Beach Park Limited v. The Queen, 2006 DTC 2845, 2006 TCC 183

The evidence of the field auditor indicated that an assumption pleaded by the Minister had not in fact been in his mind at the time of assessing. Given that the Minister did not make this assumption, the taxpayer was relieved of the burden of "demolishing" this assumption.

Arnold v. The Queen, 2005 DTC 1699, 2005 TCC 725 (Informal Procedure)

After finding that the taxpayer was not subject to the self-supply rule in s. 191(1) of the Excise Tax Act (because the taxpayer was not a builder), Campbell J. went on to indicate that he would have rejected an argument of the Crown (respecting the application of s. 191(1) had it applied) that the Minister's determination of fair market value would be required to be accepted because the taxpayer had failed to adduce evidence to the contrary and therefore had not met the onus which was upon him (pp. 1708-1709):

"Although the onus is upon an Appellant to demolish assumptions, an Appellant cannot be expected to meet that onus where those assumptions are based on the incorrect interpretation of any relevant statutory provision."

Here, the Minister had based his determination of fair market value on the date of sale of the property, which occurred two and a half years after the time of supposed application of the self-supply rule.

Orly Automobiles Inc. v. Canada, 2005 FCA 425

late disclosure of assumptions

In the course of an appeal regarding input tax credits, the taxpayer argued that, having failed to disclose assumptions at or prior to the time of the taxpayer's assessment, the Minister was not entitled to rely on those assumptions.

Létourneau JA found no statutory basis for shifting the burden of proof to the Minister in the circumstances. He stated (at para. 15):

It seems to us that, in the vast majority of cases, the appropriate remedy is the seeking and compelling of disclosure. We cannot imagine the taxpayer being refused an extension of the time ... to amend a pending appeal or to file an appeal or a notice of objection when disclosure of the assumptions of facts and law has been [meaningfully delayed].

Borys v. The Queen, 2005 DTC 1069, 2005 TCC 397

After noting an ambiguous statement of assumptions in the Minister's pleadings, Bowman C.J. stated (at p. 1071):

"Where assumptions (or for that matter any other assertion in a pleading) are pleaded in an ambiguous way, I think the benefit of any doubt arising from the ambiguity should be resolved in favour of the other party."

Morley v. The Queen, 2004 DTC 2604, 2004 TCC 280, briefly aff'd 2006 DTC 6351, 2006 FCA 171

After agreeing with counsel for the taxpayer that a taxpayer has met the onus to demolish the assumptions of fact made by the Minister if the taxpayer makes out a prima facie case, Archambault J. stated (at p. 2615) that the prima facie evidence adduced by the taxpayer must be credible and that it is for the judge to make an overall assessment of the weight of the evidence introduced by both sides and to come to a conclusion, on a balance of probabilities, as to whether a case has been made by the taxpayer.

Holm v. The Queen, 2003 DTC 755 (TCC)

Bowman A.C.J. stated (at p. 759):

"If the court sees many more instances of pleading incomplete, inaccurate or misleading assumptions we may have to reconsider the whole matter of pleading assumptions and the reverse onus and require the Crown at least to prove that the assumptions were made."

and then went on to indicate (at p. 760) that the assumptions in question were those that were made in connection with the assessment, not the confirmation.

Molson Brewery BC Ltd. v. Canada, [2002] FCJ No. 87 (FCTD)

The taxpayer carried on a brewery business as agent for its parent. Before going on to find that a transaction in which the taxpayer and another brewery company ("Carling O'Keefe") transferred the assets of their brewery businesses to a partnership should be characterized for federal sales tax purposes as a transaction in which each sold 50% of its respective assets to the other while retaining 50% of its respective assets itself, Pinaird J. stated (at para. 12) that:

"Partnerships cannot own property independently of their partner; instead, partnership property is owned by the partners in a form of co-ownership whereby each partner owns a share of the property which is proportionate to that partner's share of the partnership; and ... a partner cannot be a creditor or a debtor of the partnership."

Shaughnessy v. The Queen, 2002 DTC 1272 (TCC)

After noting that the Minister had pleaded "boiler plate" assumptions, Bowman A.C.J. stated (at p. 1275):

"The entire system developed in our courts relating to assumptions and onus of proof is in jeopardy if the respondent does not set out the actual assumptions on which the assessment is based with complete candour, fairness and honesty."

Weisz Rocchi & Scholes v. The Queen, [2001] 2 CTC 2520, 2001 DTC 3705 (TCC)

Bowman T.C.J. indicated that the onus put on a taxpayer to challenge an assessment of the Crown did not apply where the Minister imposed a penalty:

"It is contrary to the most fundamental precepts of the law and of ordinary procedural fairness that a government should be entitled to impose a penalty and then sit back and say to its subject: 'Show why you should not be penalized'. It is particularly indefensible where the facts upon which the penalty is imposed - in this case the alleged late receipt of a remittance - are entirely within the Minister's possession."

Hallatt v. The Queen, 2001 DTC 128 (TCC)

After referring to Johnston v. MNR, [1948] S.C.R. 486, Bowman A.C.J. stated (at p. 133):

"Rand, J. spoke of 'demolishing' the basic fact upon which the taxation rested. The term 'demolish' is somewhat infelicitous in that in connotes a wholesale annihilation of the factual underpinning of the assessment and a concomitantly high standard of proof. The standard is a civil one and requires proof on a balance of probabilities. A prima facie case suffices if it is unrebutted."

Locations of other summaries Wordcount
Tax Topics - General Concepts - Fair Market Value - Other 14

Bell v. The Queen, 97 DTC 484 (TCC)

Given that the matter in controversy (whether a program had been financed with a federal appropriation) was a matter that could be much more readily ascertained by the Crown than the taxpayer, very little affirmative evidence was required of the taxpayer to satisfy the standard of proof.

Bowens v. The Queen, 94 DTC 1853 (TCC), aff'd 96 DTC 6128 (FCA)

Revenue Canada originally assessed the taxpayer on the assumption that the taxpayer was not dealing at arm's length with another entity ("Trilogy") but later issued a notice a confirmation on the basis that s. 7(1)(b) applied to the taxpayer. That provision could apply only if the taxpayer was dealing at arm's length with Trilogy. The pleadings of the Minister did not deal with the arm's length question.

Bowman TCJ. found that the taxpayer could rely upon an unpleaded assumption in support of his case (the existence of a non-arm's length relationship) and that unless the Crown established that the assumption was wrong and that there were new facts that supported the assessment on a different basis, the taxpayer should succeed. In any event, the Crown had the onus of establishing any new ground advanced by it to support the assessment, and it had not met that onus.

Graham v. The Queen, 92 DTC 1012 (TCC)

Before going on to find that the Crown had failed to provide admissible evidence that the taxpayer's appeal to the Tax Court was out of time, Bowman J. stated (p. 1014):

"If the Attorney General seeks to strike out an appeal from an assessment on the ground that the taxpayer has failed to meet the required time limit, she must establish on the basis of clear and admissible evidence that, following a notice of objection, the Minister either confirmed the assessment or reassessed and that the notification of confirmation or notice of reassessment was sent to the taxpayer by registered mail on a particular date and that no appeal was filed within 90 days thereof. On such a motion the copy of the notification of confirmation or notice of reassessment and the proof of registration and date of mailing should be properly put in evidence."

Brad-Lea Meadows Ltd. v. MNR, 90 DTC 1269 (TCC)

The onus was on the Minister to adduce evidence of the proper apportionment to be made, respecting an "affiliation fee" paid by the taxpayer to a non-resident association, as to the part of the payment representing a royalty for purposes of s. 212(1)(d), and that part which was not subject to withholding tax. Because no separation had been made, the taxpayer succeeded in full.

Gross v. MNR, 89 DTC 660 (TCC)

In his Reply to the Appeal of the taxpayer from a reassessment which had disallowed a deduction of $70,000 for a donation which the taxpayer had made to a charitable foundation (the "Mocus Foundation") the Minister pleaded that the gift had not been made to a registered charity and, in the alternative, put the taxpayer "to the strict proof of the timing and value of the gift to Mocus Foundation." Taylor, J. was satisfied that the disputed assessment was struck and confirmed on the basis only of the Minister's understanding that the Mocus Foundation was not a registered charity. Since the valuation question was not considered or raised by the Minister until later, the onus respecting value was on the Minister. As the Crown had not adduced any valuation evidence, the taxpayer's appeal was allowed.

Anderson Logging Co. v. The Queen, 52 DTC 1209 (SCC), aff'd 52 DTC 1215 (PC)

At 1211:

"... the appellant is in the same position as any other appellant. He must shew that the impeached assessment is an assessment which ought not to have been made; that is to say, he must establish facts upon which it can be affirmatively asserted that the assessment was not authorized by the taxing statute, or which bring the matter into such state of doubt that on the principles alluded to, the liability of the appellant must be negatived."


Vern Krishna, "Onus of Proof in Tax Litigation", 18 Canadian Current Tax, No. 6, March 2008.

Festeryga, "The Onus Issue", CA Magazine, July 1992, p. 34.